FX levels to watch – EUR/USD, GBP/USD, USD/JPY

Dollar strength holds off as hesitancy reigns for GBP/USD and EUR/USD. As such, are we seeing a reversal or simply a temporary retracement?

Euro and dollar notes
Source: Bloomberg

EUR/USD continues to consolidate
Much like the hesitancy in major indices, EUR/USD weakness has paused over the past 24 hours. However, a continuation of this weakness does seem the most likely option here as we look towards the 76.4% retracement as a key support level in view (1.1214).

Price is currently attempting to break through the 1.1250 support level, which would subsequently look towards yesterday’s low of 1.1234 as the next near-term support level. A bullish view would only come back into play with a closed hourly candle above 1.1295.

This would subsequently look towards 1.1310 and 1.1335 as the next resistance levels. Bear in mind that we would need to see a break below 1.1144 to signal an end to the medium-term uptrend.

GBP/USD bounce unlikely to last
The pair has also slowed in its descent, with the pair trading within a symmetrical triangle. Further downside does seem the likeliest eventuality, yet a deeper retracement higher could be a possibility.

Should that occur, the 61.8% (1.4195) and 76.4% (1.4220) pullbacks are of particular interest as area we could see the sellers come in once more. Ultimately for the short-term, a closed hourly candle above 1.4179 would point towards a more extended rally towards those Fibonacci levels.

Alternately, a closed hourly candle below 1.4134 should be sufficient evidence that the move lower is back on. Subsequent levels of note are 1.4091, 1.4057 and 1.4005.

USD/JPY rally comes into question
Yesterday saw IN_USDJPY briefly break below 109.02, yet immediately followed it up with a move back up through 109.49 resistance. While this is frustrating, it is evidence that the uptrend is coming under pressure as we are seeing this morning. The key to determining whether we will see a longer lasting weakness would be a closed hourly candle below 108.89.

Given the recent uptrend, there is certainly a chance of further gains. However, as we get closer to the 110.66 resistance level that sparked last week’s losses, so we become increasingly likely to see another big move lower. 

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